Question Content Area a. Prepare an amortization table for this installment note, similar to the one presented in Exhibit 4. Note: Enter all amounts to the nearest whole dollar. Round Year 4 Interest Expense (up or down) to ensure the carrying amount is zero at the end of the note term. Amortization of Installment Notes Year Ending December 31 January 1 Carrying Amount Note Payment (Cash Paid) Interest Expense (7% of January 1 Note Carrying Amount) Decrease in Notes Payable December 31 Carrying Amount Year 1 $fill in the blank b149b9fd0071019_1 $fill in the blank b149b9fd0071019_2 $fill in the blank b149b9fd0071019_3 $fill in the blank b149b9fd0071019_4 $fill in the blank b149b9fd0071019_5 Year 2 fill in the blank b149b9fd0071019_6 fill in the blank b149b9fd0071019_7 fill in the blank b149b9fd0071019_8 fill in the blank b149b9fd0071019_9 fill in the blank b149b9fd0071019_10 Year 3 fill in the blank b149b9fd0071019_11 fill in the blank b149b9fd0071019_12 fill in the blank b149b9fd0071019_13 fill in the blank b149b9fd0071019_14 fill in the blank b149b9fd0071019_15 Year 4 fill in the blank b149b9fd0071019_16 fill in the blank b149b9fd0071019_17 fill in the blank b149b9fd0071019_18 fill in the blank b149b9fd0071019_19 fill in the blank b149b9fd0071019_20 $fill in the blank b149b9fd0071019_21 $fill in the blank b149b9fd0071019_22 $fill in the blank b149b9fd0071019_23 Feedback Area Feedback a. Review Exhibit 4 in the text. The cash payment is the same in each year. The interest and principal repayment, however, change each year. This is because the carrying amount (book value) of the note decreases each year as principal is repaid, which decreases the interest. After the final payment, the carrying amount on the

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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a. Prepare an amortization table for this installment note, similar to the one presented in Exhibit 4.

Note: Enter all amounts to the nearest whole dollar. Round Year 4 Interest Expense (up or down) to ensure the carrying amount is zero at the end of the note term.

Amortization of Installment Notes
Year Ending December 31	January 1 Carrying Amount	Note Payment (Cash Paid)	Interest Expense (7% of January 1 Note Carrying Amount)	Decrease in Notes Payable	December 31 Carrying Amount
Year 1		$fill in the blank b149b9fd0071019_1		$fill in the blank b149b9fd0071019_2		$fill in the blank b149b9fd0071019_3	$fill in the blank b149b9fd0071019_4	$fill in the blank b149b9fd0071019_5
Year 2		fill in the blank b149b9fd0071019_6		fill in the blank b149b9fd0071019_7		fill in the blank b149b9fd0071019_8	fill in the blank b149b9fd0071019_9	fill in the blank b149b9fd0071019_10
Year 3		fill in the blank b149b9fd0071019_11		fill in the blank b149b9fd0071019_12		fill in the blank b149b9fd0071019_13	fill in the blank b149b9fd0071019_14	fill in the blank b149b9fd0071019_15
Year 4		fill in the blank b149b9fd0071019_16		fill in the blank b149b9fd0071019_17		fill in the blank b149b9fd0071019_18	fill in the blank b149b9fd0071019_19	fill in the blank b149b9fd0071019_20
				$fill in the blank b149b9fd0071019_21		$fill in the blank b149b9fd0071019_22	$fill in the blank b149b9fd0071019_23

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a. Review Exhibit 4 in the text. The cash payment is the same in each year. The interest and principal repayment, however, change each year. This is because the carrying amount (book value) of the note decreases each year as principal is repaid, which decreases the interest.

After the final payment, the carrying amount on the note is zero, indicating that the note has been paid in full.

Question Content Area

b. Journalize the entries for the issuance of the note and the four annual note payments.

Note: For a compound transaction, if an amount box does not require an entry, leave it blank. For the Year 4 entry (due to rounding), adjust Notes Payable up or down to ensure that debits equal credits.

Year 1 Jan. 1	- Select -
		- Select -
Year 1 Dec. 31	- Select -	- Select -
	- Select -	- Select -
	- Select -	- Select -
Year 2 Dec. 31	- Select -	- Select -
	- Select -	- Select -
	- Select -	- Select -
Year 3 Dec. 31	- Select -	- Select -
	- Select -	- Select -
	- Select -	- Select -
Year 4 Dec. 31	- Select -	- Select -
	- Select -	- Select -
	- Select -	- Select -

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c. How will the annual note payment be reported in the Year 1 income statement?

of $fill in the blank be61a2049fbafef_2 would be reported on the income statement.

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